(I know, I know, hang with me a moment.)

I like golf. At least I think I like golf. One year I play a lot; another, not so much. No fanatic, I don’t risk death to play before Memorial Day—or every weekend after Labor Day until snow.

What’s not to like about golf, right? Outdoors, mostly in nice weather, with friends (or people you at least don’t dislike), comfortable clothes, maybe even some exercise. But 41/2 hours! Maybe it’s my makeup, but I can’t help thinking what I can get done in 4 1/2 hours, either at work or at home.

So what’s golf have to do with your financial situation? A few weeks ago (yes, after Labor Day), on the way home from a quick 5 hours of golf, a friend asked if I did “catastrophe” planning, explaining he meant “if things go really wrong in this country.”

“You mean,” I said, “if the dollar weakens dramatically against virtually every other currency, credit markets shrivel, big banks and brokerages take huge losses, economic growth slows, and real estate values plunge—all at the same time?” I think I understood where he was coming from.

This is what I like about golf: Golf is analogous to life. Life is a long journey, made up of many decisions along the way. One decision early on does not determine your final outcome. One bad shot (a horrible job interview, an incomplete grade in college, a failed marriage) does not determine your score. Help is available, a caddy who has been there before. There are different ways to play every hole successfully, and a number of tools to work with based on where you are. There is a time and place for a driver, a long iron, a wedge, and a putter.

Remember the S&L crisis of the 1980s? The stock market plunge in 1987? The bear market of the early 2000s? Remember the last time the dollar was this weak against other currencies—in the late 80s? Maybe, maybe not, but it all occurred. Hopefully those of you who were investors back then kept all of your clubs in your bag. You had cash, government and corporate bonds, large- and small-company equities, and domestic and foreign holdings. Hopefully you didn’t throw all of your clubs away and stick with the putter (cash) for the entire game.

It may feel like you just put one in the water and followed it up with a shot in the woods. But just as in golf it isn’t the last shot that determines success, it’s the next. So allow me to make a few optimistic points about the current conditions being reported on:

Weak dollar. It makes American goods and services abroad cheaper. There is potential for increased exports in the future, the outsourcing of jobs to American workers, more foreign tourism in the U.S., and more foreign demand for U.S. real estate.

Plunging real estate values. Measured over 20-year periods, residential real estate value grows an annual average of about 4%. Time and again soaring markets plunge, then return to this average. And remember, the big headlines have been about residential, not commercial, real estate.

Credit market contraction. Banks are in business to lend money. People and businesses eventually get back to borrowing based on fundamental abilities to repay, and the economy grows as a result.

Stock market declines. Not every part of the market rises and falls at the same time, so a well-diversified portfolio affords considerable protection. Also, the market as a whole has never failed to gain in the long term. Market declines create opportunities to “buy on sale,” and great money managers (assuming you’ve chosen carefully) find great sales.

This time is no different. It may be a “new course” for you, but it is not a new course entirely. If you have only one club in the bag, use the same one all the time, or ignore past experience, the game will be hard. But you have a full bag and the experience of the past to help you make good decisions.

Now, over the winter I just have to figure out how to make similar sense out of tennis and save myself 3 1/2 hours!

Author: David Jeter, CFP®, Allegheny Financial Group, November 2007


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The above comments are provided for discussion purposes only and are not meant to be an offer of any specific investment.